Subrecipient Processes – Managing 3rd Party Contracts
7:55PM Nov 23, 2021
Good morning. Everybody. Welcome to maybe I'll just give it another minute. Welcome. We've got two people okay
welcome everyone to this weekly meeting of the AFN Navigator Program. My name is Nils Andreas and I'm the Executive Director of the Alaska Municipal League. And happy for this partnership with AFN to make sure that tribes and others have every all the information they need to manage through both Cares Act and ARPA, funding, implementation, reporting and compliance are just three people on and I don't know quite what to do with that. But Greg, I think you're a navigator, right? Do any opening words or anything you'd like to say?
Sure, Nels, um, yeah, on behalf of the navigators, we're thankful with this partnership with FML and really appreciate the opportunity to get training out to all of our various constituents and members. So this is an important opportunity in terms of the number of people on the call today. I think it's probably a good idea to just spend a little bit and see who can join. I'm expecting to be more participants, but I don't know for sure.
Yeah. Thanks, Greg. I know these are recorded too. So even though there's only a few who can maybe join for right now. It's definitely worth making sure this is available for others who might be able to listen in later. Thanks, Greg. I will for folks who are on make sure if you've got questions you can put them in the chat bar or just raise your hand unmute yourself and we can take questions along the way. All note that the topic maybe isn't so exciting. Tracking sub recipient processes and third party contracts and what that all means. But it's it is very important, I think especially well for for Prime recipients. Recipients of both Cares Act and ARPA funds as it relates to the audit process. So really, you can think about how you're managing your both cares and ARPA funds, and your sub recipient relationships in relation to a future audit, what that will look like. And so what I want to do is maybe just run through a couple of different things related to how you can think about sub recipients. Generally because it's not a term that we use often. But if you're familiar with federal funding processes, then you're probably familiar with sub recipients and the traffic tracking necessary and this is something that really came out of kind of uniform guidance that's out there as it relates to OMB and auditing processes. So if you've got questions about what a sub recipient is, or how you should be thinking about it, your auditor is your first point of reference and having them kind of walk you through exactly what what you need to be paying attention to is going to be really important and and I think maybe just to define, what's the difference between a sub recipient and a contractor and I think this is really crucial. So these are the kind of broad definitions, but we can talk about them more specifically. In relation to ARPA and carers act. But a sub recipient uses the federal funds to carry a carry out a program for public purse purpose specified in authorizing statute. So basically, for tribes and for agencies, who are prime recipients, they're direct recipients of Cares Act funds and for tribes of ARPA funds. You're the prime recipient, you have all the reporting requirements to the federal government. You have all the compliance and guidance from both Cares Act and ARPA to see through if you basically if you move those funds to another, an outside entity, and ask them to use these funds to carry out a program that you would otherwise carry out on your own kind of for a public purpose purpose that's consistent with the guidance that you received from Treasury. They're a sub recipient and you will, so the sub recipient that then is running their own program based on what you've asked them to do. They have they make decisions related to programs and what that looks like. They they also and I think most importantly, there they need to require they need to respond to and follow through on all the all the guidance that's coming for that apply to you. All the guidance that applies through Treasury for Cares Act. And ARPA also applies. To the sub recipients. So while they've got kind of this independent level of decision making about how they utilize the funds that you provided, they still have to follow the Cares Act guidance and final rule, and the ARPA interim final rule and FAQ.
And the difference then between a sub recipient and a contractor is a contract is there is there for the purpose of obtaining goods and services for the non federal entities own use, and creates a procurement relationship. So basically, if a sub recipient is a third party that is providing a service on your behalf, that's the relationship that you need to maintain. If you're contracting with somebody you utilizing cares actor are pro funds with a business or nonprofit your purchase a good or service from them, whether it's technical assistance or food or whatever that is you're not creating a sub recipient relationship. So it's really about are these How do you consider these pass through funds? Or is the third party utilizing these funds on your behalf for a program that you identified or you contracting with and procuring a good or service from a contractor and to some extent, when you're reporting back to Treasury, either through grant solutions, for Cares Act, or through the Treasury portal for ARPA, you know, you're you're focused on any kind of awards that you're making, I think above $50,000 It's not necessarily going to there, they're not going to be tracking your sub recipients at that level necessarily. Really, where that will play out most is in your auditing process, but be paying attention to where you need to identify it expenditure as a sub recipient, or contractor. And again, the most important thing about sub recipients is that you have to require that your sub recipient complies with all the additional guidance from from the federal government. And it's it's pretty extensive to the information that you have to provide the recipient or sub recipient. So you have to make sure that in that agreement that you have with the sub recipient, you've got their name and DUNS number that they're registered email@example.com. You have to make sure they know about what the federal award number is and the identification number, the award date, period of performance. Any of the funding information, federal word project description, the name of the federal Awarding Agency, the CDM CFDA and title a number and so on. And there's pretty good guidance that I found, at least for your ARPA funds around sub recipient and maybe the best way to to to go through what the federal guidance says about about subrecipient is just to go through the compliance and reporting guide guidelines. So I'm going to share my screen here and oh, you can see that just fine. So actually, I've got a bunch of different resources up here. But this, this first document is the compliance and reporting guidance provided by Treasury this is for the sisal for funds the funds that you have for from arpa. Most of this should apply to your Cares Act funding to so it would apply in a lot of what your you've already been doing for Cares Act, how you've been reporting any of your audit process, it would apply to NCS and their Cares Act funding as well. But I just went through and did kind of a ctrl F for sub recipient. And, and it's pretty extensive in this 20 page document just kind of where
where this is found and I think, you know, this first piece is really important, you're responsible. The prime recipient is responsible for the sub recipient. So if you're making a sub award to a third party of any sort, who's providing a service on your behalf, you're responsible for, for their compliance. Which means you're you're responsible for making sure they comply with the law. With the terms and conditions that you signed with the interim final rule and the final rule when it becomes appropriate or out there and then all the reporting requirements. So you need to set up a system for making sure that any sub awards sub awardees, sub recipients are complying with all those and that they're reporting to you the outcomes of their programs. So you you have that responsibility to make sure that they're not using funds for ineligible purposes and there's no fraud, waste or abuse associated with the award. But also means that you as the prime recipient needs to have all the internal controls and sub recipient oversight and management processes in place and there's good description in this reporting guidance about what that should look like. You you need to determine the sub recipients eligibility which see, sorry for switching back and forth here. I think is is basically for a private nonprofit for a tribal government or for an arm of either a state or local government entity. So that's if you're moving funds to a local government if you're moving funds to a school if you're moving funds to a native health, tribal health nonprofit, to a community foundation to another nonprofit in your community, to a village corporation. You hover that movement of funds looks for you. You will need to determine that sub recipient is eligible to manage those funds. They do use this word beneficiary so if you're if you're providing grants to individuals, grants to nonprofits, brands, to businesses, to help them through that economic impact of the pandemic, that you're not creating a sub recipient relationship. They are simply beneficiaries and you report out that as such, it doesn't matter. There's no level of funding that triggers one versus the other. It's again, are they providing a service for you or are you providing support for them? Or are you contracting with them for a better service? So keep in mind I guess that's a third layer of AWARE funds might go and the relationship you have with those who you fund. So sub recipients, contractors and beneficiaries. You You do have to make sure that if you've sent if you've obligate if you've sent funds to sub recipients, they have to comply with the same close out processes. They've got the same timing in terms of having reported obligated or expended all the funds or have the obligation to return them to you to get back to Treasury at the end of the period of performance. So in terms of the kind of uniform administrative requirements these all apply to both recipients and sub recipients, and these are all things that you'll have to make sure they're aware of things like the allowable activities, different cost principles, administrative costs, and it should all just note if you haven't seen this before, there's no
you they can use their current negotiated indirect cost agreement so that is in there. Or Or they can select the de minimis rate. So kind of track that that same would apply to the sub recipients. And you need to, again, maintain awareness and procedures in place for making sure that the sub recipient has that valid sam.gov registration, and that's part of your due diligence and making awards to sub recipients. In terms of monitoring, the compliance reporting guidance has a good section dedicated to this. So these are, again, pass through entities and it's your job to manage and monitor those you've got to identify that the sub recipient that the that they're an awardee of the funds that you've received, again, both for Cares Act and ARPA funds. This sisal for is a is the ARPA funds that went not through BIA but directly from Treasury. All the compliance and all the reporting requirements for expenditure of those funds. You need to evaluate whether that sub recipient may be non compliant. And there's a list of factors in here that you can use to decide that but if you your auditor will be looking at whether you completed that seal, you'll have to have conducted some evaluation of whether whether there's any risk in that sub recipient relationship. So you can look at prior experience in managing federal funds, previous audits kind of what personnel and policies they have in place, and how that sub recipient will execute its responsibilities and what kind of oversight they'll give to the management of those funds. So make sure you have in place those written policies and procedures for managing sub recipients. The That's not for you. Again, this, it talks about this portion here is about beneficiaries. So sub recipients are one thing if if you're providing funds to end users to respond to the negative impacts of COVID they're not sub recipients. They're beneficiaries. Okay, got through most of that. sub recipients will be responsible will if you've granted or if you've sub awarded more than $750,000 in your cares actor ARPA funds to sub recipient. They would be responsible for the Federal single audit, just like you would be or basically if if the amount that you sub awarded increases the federal funds that they've received from you or anybody above $750,000 Then they're going to have federal single audit. Just like you would and they'd have to follow those audit requirements. The there's some internal controls, best practices here that are helpful. But we're kind of we went through some of that already. Here's the federal single audit requirement, both you and sub recipients are responsible for sub recipients have to go through the same civil rights compliance that you did. And here's the here's the information that you need to provide this is when you're reporting to Treasury, either through grant grants and solutions or the Treasury portal for any expenditure above 50,000. Then you need to provide all this information including if it's a sub recipient, you know, their DUNS number, where they're located, and then all the information related to the award that you made to them and what they're doing on your behalf.
I think that's
that's about it, I think, from that. From what's out there so far from Treasury, there are a couple of good resources. And if you haven't seen that compliance and reporting, or the compliance and reporting guidance I can share that in the chat bar. Hopefully, you've you've seen that. And there's not a lot I think, for Cares Act, you would follow same kind of treasury site for under a CRF Coronavirus, Coronavirus relief funds. A lot of the reporting and record keeping information is now over at the Office of Inspector General. And there's a Cares Act reporting and record keeping information page and that has some of the responsibilities that you'll have in making reporting on sub recipients. So and it's very similar, I think, to what we just covered under the sisal for the ARPA funds. I will pause there and see if there are any questions
or anything you would add to your own experience about your own experience managing sub recipients
he knows this is Lisa.
Yeah, okay. Suck. Hi. Good to see you.
Yeah, look, I don't have sub recipients are all that common. But it is a good thing to cover. Most time a grantee carries that like hires employees and carries out their work. But I think sub recipients are also considered partnerships. So if somebody is going to do a project in partnership with another organization, that partnership might be considered a sub recipient, especially if that organization is going to manage grant money on behalf in that partnership.
Yeah, that's a good way to frame it. And I imagine a lot of those partnerships have sprung up I know that for a for local governments for cities, you know, often that look like the city partnering with a community foundation to distribute funds, or Yeah, I mean, and I know that there's some city tribe relationships right now where they're working out you know, MLAs or something that movie partnerships expend funds on different infrastructure projects. If that partnership results in the prime recipient, granting funds to that other partner, then that will create a sub recipient relationship that everybody will want to be paying attention to.
And I just want to add it, it's probably a lot different than a consulting relationship where somebody hiring a consultant, they'll have its own agreement, but that consultant generally isn't authorizing and expending funds. They're often submitting invoices, they're doing things like that for billing that not necessarily sub recipients. I just wanted to add that to the discussion and and I think where you might see a partnership expend funds is if an employee is provided as match, let's say the city and tribe are working together, but the tribe uses match. There's no sub recipient relationship. But if the tribe is granted money to compensate their staff or hire new staff, there's a real sub recipient relationship. So it's kinda you kind of have to follow how the money's being spent. I saw somebody comment in chat, give some examples and those are things I have come across in my experience.
Yeah, no, thank you. There's a question Are there any sort of model flow down clauses for sub recipients? And by that, Greg, do you mean kind of what kind of contractual agreements or what kind of agreements do you need to have in place for them? Yeah, but what
is going to work in a written agreement?
Is I haven't seen any clean ones or easy ones. I mean, here's one that I found and I'm sorry, this isn't. This isn't an Alaska model, but maybe we can all work to find one from from Alaska. This is from Clallam. County. It's 104 pages. Not Yeah. not straightforward. And if we're not used to these, then I think it's a we could do some work to find good models that people are using. I think the important thing in any if there's a template that's provided, or if there's something we work on, anything is going to need to include a couple kind of main components. So you have to tell the sub recipient, you have to make sure they have access to all the same guidance and reporting requirements that you do. So you need to reference kind of the Cares Act or ARPA Final Rule, or interim final rule and FAQ. That guidance you need to make sure they understand what are eligible expenditures
and you need to so here so this is from Washington. You should identify how a sub recipient what makes them eligible.
Or this is probably directing the sub recipient, what are eligible expenditures that they can use making these funds. So it looks like Clallam County, provided to their economic development Commissioner something a large amount of funds and then is directing them for you need to establish the eligibility for funds that can be distributed. And, and then the rest of this is his background. Here's the sub recipient agreement. You need to make sure that the sub recipient goes through the same terms and conditions and Civil Rights Act clauses that you had to sign off on so they that's in there, here's eligible uses you in terms of the same things that apply to prime recipients need to include in their re how funds get distributed and what reporting requirements are, and they're reporting to you and you need to be able to report to Treasury and for whichever group of funds it is on time. So you want to make sure that you've got adequate reporting. I can this was just the the one that I found most quickly. I'll put it in here in the chat bar, but you can kind of see it's pretty extensive.
So that was the agreement there and then and then I think here they provided probably the bulk of it is all the for all the the agreement between Treasury and the prime and the prime recipient. So basically, the agreement that you've already got in place with Treasury would be included in a sub recipient agreement. Which is that here's the terms and conditions so that needs to go over. Here's the Civil Rights disclosures, all those same documents that you went through with id.me. And here's the interim rule. It looks like maybe we could just put together a package of here's the four or five Pendik appendices to that needs to be included. But basically, you're making sure they've got all the information that you do. Oh, here's a compliance reporting document that I just went through. So it's, it's all those things. Yeah. Oh, I'll see if there any of our members who have models that we can get out to all that Bethel does and I'll see what I can find. Is that what you were talking about Greg? Basically, what should that look like?
Yeah, exactly. That'd be really helpful. Thanks.
Yeah. I'm good. So yeah, I think to your call a six point we might be talking you kind of using different terminology to so sub recipients can also be thought of in terms of partners who are partners that you're working with to get funds out or to implement a project and, you know, when I think of kind of what that project might look like, it might be an infrastructure project. It might be a health there might be a food program. Water and sewer project with a and THC, you know, something like that where somebody else is doing the work that you're the funds are eligible for, and not just doing the work but doing something that you could otherwise do on your own. And, and that so that partnership is key. I think we talked about contractors and so that partnership or sub recipient is different than a contractor or a consultant, somebody who you're purchasing goods or services from and then again, those are all different than beneficiaries. So if an individual resident a member, a business or nonprofit just needs support financial support because of the economic and public health crisis, then that allocation of funds doesn't make them a sub recipient. Yeah. Oh, good clarifying terms. Any other questions or comments out there in terms of this process?
just in terms of I think I mentioned that a lot of this will be particularly relevant when an audit income is required. I know the $750,000 triggers the federal single audit, I think that will apply to every probably every tribe in Alaska. Further Arca allocation, so if anybody hasn't gone through an audit process before, I don't know, but you should be thinking along along those lines, like how do we make sure whatever we're doing right now, is consistent with, you know, what needs to happen with it with an audit on the other side of that. Greg, do you have any sense of how listeners might already be familiar with federal single audit processes or are you for a sec any? Yeah, Greg?
Yeah, so my experience really is more in the government contracting arena, but it's pretty much the same thing. There's always going to be the flow down requirements from the main grant or award and the same thing is true in contracting. So it's if the business is already involved in federal contracting to some extent, then they'll have a good background for doing this kind of accounting and billing. But it's also the sort of thing where the compliance is so important that if you need a compliance professional or a CPA or or other professional to help you that's something you should strongly consider if you've had to flow down a substantial amount of money to the folks that are, you know, getting the work done.
Yeah. Perfect. Because it's like anything else you would add?
No, I just think the ingredients are important to put out front, you know, agreements are never really looked at until you have a disagreement. And then like, who pays for what what did they say they were going to do? So it's good to get those up front when people are getting along and motivated to work together. You know, and money hasn't changed hands yet. So that's the time to really, you know, put these agreements together is early on. You know, so people know what to expect. They know what to follow, and everybody gets on the same page. So that is normally a really good practice to make sure you have a good relationship and you know, everyone knows what rules to follow. What's expected. Yeah.
Yeah, okay. But I think since we've got just a few people on today, we've covered I think a lot of what we'd hope to and you know, usually these, these weekly calls are driven by who was attending or what questions are out there. So, I think that so be thinking right now about the partnerships that you have in place. The agreements will pull together kind of the list of resources that need to be included in a sub recipient agreement. It's not something that you want to leave to next year. And you if you haven't been involved in a federal single audit before, then make sure you're thinking along those lines and talking to an accountant or CPA firm who can do that. Be I think, be sure again, that when you're thinking about your sub recipients, it's not it probably a lot of these are natural partners. They're folks that you've worked with in the past, but you need to go you need to remember to go through some level of evaluating risk. And, and basically that means that the sub recipient, you it's your job to make sure that the that pass through dollars can be managed appropriately. So you need to assess that sub recipients. time and resources, their prior experience, and, and personnel. You need to have in place monitoring systems, you need to verify that the sub award that you made is being used for authorized purposes and that your goals are being achieved. And if there are since this is a multi year program, if there are audit, comments or feedback, that note any deficiencies then you want to make sure your sub recipient is is able to address those that use scale up your monitoring activities in response as well. So make sure you've got a process for monitoring your sub recipients. And you want to make sure that you're for so if your partner is a nonprofit, or another kind of public sector recipient that they're probably familiar with following through on federal or public purpose. Funding. If it's a for profit or sub recipient. Just make sure they're they become familiar with and can follow the compliance requirements and and keep them accountable provide training or technical assistance. You can provide you can perform on site reviews. And in other ways, it's to make sure that they're accountable if, for instance, the award that you make is less than $750,000. Maybe it's half a million and they don't trigger the federal single audit. Maybe there's some other role for you to make sure that they can report accurately how they've complied with the terms that that you've set up the I know so I think that's, that's about it. We'll put together some additional resources for you I know this week. You might otherwise be busy, but for those who are able to listen in later, make sure you do reach out to any of your navigators. So with more, for more information or with questions. The recordings will be up on the website but and AMS always on hand to try to address questions as well. So thanks for this. Thanks, everybody, thanks to AFN for this continued partnership. And we'll look forward to hopefully a little bit of a break this week. So thanks, everybody.